Glasgow Prestwick Airport: economic impact assessment

2. Core aviation impacts

This section analyses GPA’s core activities, as outlined in Section 1.3 (FBO and Fuelling services; Passenger services; Cargo services; Aerodrome services). Commencing with a trend analysis for the top three revenue-generating services under the ‘Core Activities’ pillar, for the period of FY 2019 to FY 2023.^[21],[22] Additionally, this section explores the direct, indirect, and induced economic effects of GPA's operations, estimating its contribution to both GVA and employment.

2.1 Trend analysis

This subsection examines trends in GPA’s revenue and its three main revenue streams: FBO and Fuelling, Passenger, and Cargo services, focusing on post-Covid-19 recovery. It sets the stage for the GVA and employment analysis in subsection 2.2 by highlighting the activities driving productivity and how GPA has adapted to sustain operations amid a challenging macroeconomic climate.

2.1.1 GPA’s revenue streams (FY 2019-23)

The majority of GPA revenue is from its FBO and Fuelling operations. This is unique to GPA and is in contrast to conventional commercial airports with a focus on passenger services. Figure 2.1 provides a breakdown of the airport’s revenue and analyses how this has changed post Covid-19 and Brexit.

Bar chart showing Glasgow Prestwick Airport revenue by category from FY 2019 to FY 2023. Revenue rises from £25m in 2019 to £58m in 2023. Bars are stacked by category: FBO & Fuel (largest, dark pink), Passenger (grey), Cargo (orange), Property (yellow), Aerodrome (light grey). FY 2023 breakdown: FBO & Fuel 78%, Passenger 7%, Cargo 6%, Property 6%, Aerodrome 3%.

Source: GPA Financials, 2019-23

A review of GPA’s revenue, by core activities, presented in Figure 2.1, indicates that FBO and Fuel related activities formed the largest share of revenue at 78%, followed by passenger and cargo services at 7% and 6% respectively, in FY 2023. Between FY 2020-2021 GPA’s revenues were negatively impacted by the effects of Covid-19 related lockdowns on air travel. This resulted in reductions across all revenue generating activities, with total revenue declining by approximately 47% from £36m in FY 2020 to £19m in FY 2021.

Post FY 2022, GPA has focused efforts to expand its FBO and Fuel services. As a result, there has been a significant increase in total revenue, with a growth rate of 60% from £35m in FY 2022 to £58m in FY 2023. This growth can be attributed to a combination of factors, including both value and volume effects.

2.1.2 Trend analysis - Fixed Base Operator (FBO) and Fuelling services (FY 2019-23)

As its largest revenue generating activity, GPA’s FBO and Fuelling activities^[23] provide a wide range of aircraft services for customers. This includes refuelling services to military aircraft and military and executive FBO. In addition, fuel is supplied to the site by BP via rail, stored in GPA's own fuel farm, which is leased to BP and operated by North Air Limited on BP's behalf.

Two line charts titled “GPA’s fuelling performance, FY 2019–23.”

• Top chart: GPA Fuel Litres (millions) from FY 2019 to FY 2023: 20, 37, 19, 36, 44.
• Bottom chart: GPA Fuel & FBO Revenue (£m) for the same period: 11.8, 20.9, 11.8, 25.6, 46.1.
  Both charts show an increase from FY 2021 to FY 2023 after a dip during FY 2021.

Source: GPA Financials, FY 2019-23

Figure 2.2 illustrates the trends in GPA’s fuelling volumes and revenue pre and post Covid-19. In volume terms, litres of fuel increased from 19mL in FY 2021 and to 44mL in FY 2023. Whilst, despite an initial increase in FBO and fuel revenue between FY 2019-20 of £11.8m to £20.9m, Covid-19 related travel restrictions are likely to have impacted GPA’s fuelling operations in FY 2021, resulting in a reduction back to FY 2019 revenue levels of £11.8m. GPA experienced a rapid recovery post Covid-19, with fuel volumes reaching 44mL and revenue reaching £46.1m in FY 2023.

2.1.3 Trend analysis - Passenger services (FY 2019-23)

GPA is one of four commercial airports operating in Scotland and is one of two airports on the west coast of Scotland, alongside Glasgow Airport, 34.1 miles away. Designed to handle up to 4m passengers annually, the airport benefits from favourable weather conditions, strategic location and well-connected surface transport links with direct links to the M77 motorway and via a dedicated railway station connecting GPA to Glasgow Central and Ayr. It has two runways, one of which is the longest commercial runway north of Manchester Airport. Ryanair is the current scheduled passenger carrier at the airport, having operated at GPA for the past 30 years. It offers a network of 10 ‘sea, sun and sand’ routes across Europe including: Spain (Alicante, Barcelona, Gran Canaria, Lanzarote, Malaga, Murcia, Palma, Tenerife), Portugal (Faro) and Italy (Pisa) at competitive rates.

Two line charts titled “GPA’s passenger performance, FY 2019–23.”

• Top chart: GPA passenger numbers (000s) from FY 2019 to FY 2023: 662, 621, 47, 118, 459. Shows a sharp decline in FY 2021, then gradual recovery.
• Bottom chart: GPA passenger revenue (£m) for the same period: 3.5, 3.1, 0.8, 1.3, 3.8. Follows a similar trend with lowest point in FY 2021 and highest in FY 2023.

Source: GPA Financials, FY 2019-23

The pandemic led to a significant, 93% year-on-year decrease in total passengers from FY 2019-2021 at GPA. In comparison, the average decline in passenger numbers across all Scottish airports for this period was 73%.^[24] Figure 2.3 illustrates the trends in GPA’s passenger numbers and revenue pre- and post Covid-19. Passenger numbers declined from 662,000 in FY 2019 to 459,000 in FY 2023. However, they are expected to rise as international travel demand continues to recover. The overall decrease in passenger numbers at all Scottish airports between 2019 and 2023 was 9.8%. This figure rises to 18.2% when excluding Edinburgh Airport, highlighting the significant passenger traffic handled by the airport.

In FY 2022 and FY 2023, there was a resurgence in passenger traffic at GPA, although these volumes were considerably below pre-pandemic levels, with FY 2023 figures reaching 70% of FY 2019 levels. This contrasts with the air travel recovery of 74% reported by the CAA in early 2023 and the 99% recovery for Scottish airports in late 2023.

During calendar year (CY) 2023, GPA handled approximately 525,000 passengers representing around 2.1% of the total Scottish air passenger volume. In terms of travel destinations, 99.7% of GPA’s passengers travel to the EU and only 0.3% travel locally within the UK. Compared to other regional airports like Edinburgh, Glasgow and Inverness Airports, GPA serves a larger proportion of international travellers, primarily because of the international destinations it serves.^[25]

In summary, despite a challenging macroeconomic environment, particularly amidst the Covid-19 pandemic and Brexit related economic downturn, GPA continues to provide low cost access to holiday destinations to residents in the local and wider catchment area in Ayrshire and the West of Scotland.

However, given increased competition in the passenger services sector, the airport is strategically diversifying its revenue streams towards areas that offer a distinctive competitive edge, notably focusing on its strengths in dedicated cargo services, specialist aircraft handling through its FBO services and growing its tenant portfolio.

2.1.4 Trend analysis - Cargo services (FY 2019-23)

Cargo services represented the third largest revenue generating activity for GPA in FY 2023 (per Figure 2.1). The airport’s cargo services include the transportation of commodities such as oil, gas, livestock and pharmaceutical goods. GPA offers both scheduled and charter services for this segment, via two scheduled cargo operators: Air France Cargo and Cargolux. In comparison to other Scottish airports, GPA accounts for just under a third of Scotland’s total cargo market (at 27.5% in CY 2023), positioning it as the second largest provider of cargo services in the region in 2023, second to Edinburgh Airport.

Figure 2.4 presents trends in GPA’s cargo volumes and revenue between FY 2019 to FY 2023. Similar to FBO and fuelling, as well as passenger services, GPA’s cargo volume and revenue experienced a Covid-19 related decline in FY 2021, dropping to 13,000 tonnes and £3 million, respectively. However, the business area recovered quickly in FY 2022, with GPA experiencing an increase in cargo demand to 18,000 tonnes driven by its transportation of NHS cargo, supplying vaccines, test kits, and medical equipment amidst the ongoing Covid-19 pandemic. In FY 2023, with the return of global belly hold cargo capacity^[26] post pandemic and despite the ban on the Russian registered fleet impacting the movement of heavy equipment, cargo volumes and revenue returned to pre-pandemic levels at 13,000 tonnes and £3.4m respectively in FY 2023.

Two line charts titled “GPA’s cargo performance, FY 2019–23.”

• Top chart: GPA Cargo Tonnes (000s) from FY 2019 to FY 2023: 14, 14, 13, 18, 13. Shows slight decline in FY 2021, peak at FY 2022, then drop in FY 2023.
• Bottom chart: GPA Cargo Revenue (£m) for the same period: 3.3, 3.3, 3.0, 4.2, 3.4. Follows similar trend with highest revenue in FY 2022.

Source: GPA Financials, FY 2019-23

GPA's cargo ambition is to deliver distinctive, premier 24/7 cargo services. As well as prioritising niche product lines, including aircraft engines, oil and gas equipment, live animals (such as horses) and refrigerated products, utilising its cold storage facility, established in 2024.

2.2 GPA’s direct, indirect and induced impacts (2022-23)

This subsection presents GPA’s economic contribution in FY 2022-23, in terms of two key economic indicators:

• 1. Gross Value Added (GVA) - GVA measures the value that is added by a business or industry sector. It is measured as the difference between the value of goods and services produced and the goods and services used as an input. It is, therefore, the company and sector level contribution to national gross domestic product (GDP); and
• 2. Employment - Annual full-time equivalent (FTE) jobs supported.

GPA’s GVA and employment impacts have been estimated in gross terms in terms of three key impacts, direct, indirect and induced, as follows:

• 1. Direct impact: the impact of GPA’s own activity. Direct GVA is calculated as the sum of wages and profit (EBITDA), i.e., earnings before interest, tax, depreciation, and amortisation, while direct employment is the total number of full-time equivalent (FTE) employees for the year.
• 2. Indirect impact: the impact on the UK economy as a result of GPA’s procurement, which includes both the economic value added from immediate suppliers and the wider supplier chain (for instance, the supplier of the supplier). Indirect impact is calculated using Type I multipliers.
• 3. Induced impact: the impact from spending by GPA’s employees and by the employees linked to its supply chain. Induced impact is calculated using Type II multipliers.

Collectively these three impacts identify the total gross quantifiable impact of GPA’s core aviation activities in the Scottish economy. The link between the three impacts is illustrated in Figure 2.5.

Diagram titled “High level overview of GPA’s direct, indirect and induced impacts.” It shows three connected boxes:

• 1. Direct – Employment and gross value added (wages and profit), linked to supplier expenditure and employee spending of wages.
• 2. Indirect – Supply chain spend, generating employment and gross value added (wages and profit).
• 3. Induced – Employee spend, creating employment and gross value added (wages and profit).
  Arrows indicate relationships: supplier expenditure flows to indirect impacts, and employee spending flows to induced impacts.

Figure 2.6 provides further detail in relation to the impact pathways through which GPA’s activities translate into economic benefits in the local and wider economy. When assessing GPA's economic impact channels, it is important to understand that wider impacts are not part of the core impact estimates, but are included in the secondary and wider impact estimates.

Economic impact channels
GPA business activities

• Direct impacts
• Create value through its operations, captured by the margin between input costs and the selling price of its services.
• Employ people for the day-to-day running of the airport (direct employment).
• Indirect impacts
• Generate business-to-business purchases in the supply chain.
• Create employment opportunities through supply chain spending.
• Induced impacts
• Stimulate the economy through employee spending.
• Stimulate the economy through employee spending (repeated in diagram).
• Wider impacts
• Stimulate the economy through wider channels such as tourism, land value appreciation, skills development etc.

2.5.1 Estimating GVA impacts

This sub-section sets out the three-step approach undertaken to estimate the gross GVA impact of GPA’s core activities, as follows:

• Step 1 - Direct impact: the direct value added of GPA’s operations is calculated, using FY 2022-23 data from GPA’s financial accounts. This is estimated by aggregating GPA’s operating profit before interest and tax, consumption of fixed capital and total employee compensation. The result provides a direct GVA contribution of £14.8m, which represents value created by GPA through its direct business activities.
• Step 2 - Indirect impact: i.e. supply chain expenditure is estimated using the Type I multiplier from the SG’s IO table (2019).^[27] This gives an indirect GVA contribution of £7.4m, representing GPA’s value created through supply-chain spending.
• Step 3 - Induced impact: i.e. employee spending impacts are estimated using the Type II multiplier from the SG’s IO table (2019) to estimate the total impact of GPA’s activities. This gives an induced GVA contribution of £4.4m, representing GPA’s value created through its employees’ spending.

On this basis the total estimated Scottish GVA contribution of GPA for FY 2023 is £26.6m. A detailed outline of this methodology is provided in Appendix 1, and the summarised results are presented in Table 2.3 below.

Table 2.3: Summary of GVA contributions

2.5.2 Estimating employment impacts FY 2022-23

Information provided in GPA’s financial statements suggest that the airport employed 291 FTEs. Using the same methodology as outlined in Section 2.5.1, GPA’s direct, indirect and induced employment impact has been estimated as follows:

• Step 1: direct employment impact of GPA = 291 FTEs.
• Step 2: indirect employment impact of GPA using a Type I employment multiplier of 1.5 from the SG IO table, 2019 = 146 FTEs.

• Step 3: induced employment impact of GPA using a Type II employment multiplier of 1.8 from the SG IO table (2019) = 87 FTEs.

In total, this results in an estimated direct, indirect and induced employment impact of 524 FTEs in FY 2022-23, as summarised in Table 2.4 below. This impact underscores GPA’s importance in the region, particularly in the context of the higher levels of unemployment and economic inactivity in South Ayrshire, compared to the rest of Scotland and Great Britain, as reported in preliminary analysis conducted by SG in Appendix 3. With GPA representing around 23% of the total employment in South Ayrshire’s Transport and Storage Sector, which employed approximately 2,250 people in 2021.

Table 2.4: Summary of GPA direct, indirect and induced employment contributions, FY 2022-23